March 10, 1992
Where a personal injury or wrongful death case is to be tried in Michigan state courts, a lawyer may not enter into an agreement for, charge, or collect a contingent fee in excess of one-third of the recovery, even if the client resides in a state where fees in excess of one-third are allowed.
Where a personal injury or wrongful death case is to be tried in Michigan state courts, a lawyer may not divide a fee with an out-of-state lawyer where the total fee earned by all lawyers for the client exceeds one-third of the recovery, even if rules of the other state allow fees in excess of one-third.
References: MRPC 1.5(a), (e), 8.3(a), 8.4(a); R-11; CI-548, CI-853, CI-933; MCR 8.121(A), (B); Ambrose v Detroit Edison Co, 65 Mich App 484 (1975); Ecclestone, Moffet & Humphrey, PC v Ogne Jinks, Albert & Stuart, PC, 177 Mich App 74 (1989).
A lawyer has been contacted by an out-of-state lawyer on a personal injury case to be tried in a Michigan state court. The out-of-state lawyer has a 40% contingency fee agreement with the plaintiff client, which fee is not improper in the out-of-state lawyer's home state. The Michigan lawyer inquired whether it is permissible to:
- Take over the case for the out-of-state lawyer for the 40% contingency fee, as long as the client consents;
- Associate with the out-of-state lawyer for one-half the 40% contingency fee rate; or
- Associate with the out-of-state lawyer for the 33-1/3% contingency fee allowed in MCR 8.121(A), knowing that the out-of-state lawyer will retain the remaining 6-2/3% as agreed with the client.
Division of fees between lawyers who are not in the same firm is governed by MRPC 1.5(e), which states:
"A division of a fee between lawyers who are not in the same firm may be made only if:
"(1) the client is advised of and does not object to the participation of all the lawyers involved; and
"(2) the total fee is reasonable."
MRPC 1.5(e) is significantly different from the former MCPR DR 2-107(A), which stated:
"A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of his law firm or law office, unless:
"(1) the client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.
"(2) The division is made in proportion to the services performed and responsibility assumed by each.
"(3) The total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they rendered for the client."
Several ethics opinions interpreted the former MCPR DR 2-107(A) in circumstances similar to those presented here. CI-548 prohibited a lawyer from entering into an agreement with an Illinois lawyer for a case to be tried in Illinois, in which the laywer's fee exceeded that allowed under Michigan court rules; if the lawyer had already entered into the fee agreement, CI-548 suggested that the lawyer remit to the client the difference between the lawyer's allowable fee and the contract fee. CI-933 prohibited a lawyer from collecting a contingent fee in excess of Michigan court rules in a case involving an Ohio resident suing in Michigan state courts, although the fee was not improper where the client resided.
MCR 8.121(A) and (B) state:
"(A) In any claim or action for personal injury or wrongful death based upon the alleged conduct of another, in which an attorney enters into an agreement, express or implied, whereby the attorney's compensation is dependent or contingent in whole or in part upon successful prosecution or settlement or upon the amount of recovery, the receipt, retention, or sharing by such attorney, pursuant to agreement or otherwise, of compensation which is equal to or less than the fee stated in subrule (B) is deemed to be fair and reasonable. The receipt, retention, or sharing of compensation which is in excess of such a fee shall be deemed to be the charging of a 'clearly excessive fee' in violation of [now MRPC 1.5(a)].
"(B) The maximum allowable fee for the claims and actions referred to in subrule (A) is one-third of the amount recovered."
Michigan court rules clearly govern actions in Michigan state courts. Thus, pursuant to MCR 8.121(A), a contingent fee for any personal injury or wrongful death claim pursued in Michigan state courts is limited to one-third of the amount recovered. This is so whether the lawyer is licensed in Michigan, or an out-of-state lawyer admitted for the particular matter pursuant to Supreme Court Rules Concerning the State Bar of Michigan, Rule 15, Section 2. The total fee of all attorneys for the party is limited to one-third. See, R-11; CI-853; Ambrose v Detroit Edison Co, 65 Mich App 484 (1975); Ecclestone, Moffet & Humphrey, PC v Ogne Jinks, Albert & Stuart, PC, 177 Mich App 74 (1989). "A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee . . . ." MRPC 1.5(a).
This result is reinforced by MRPC 8.5, which states:
"A lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction although engaged in practice elsewhere. A lawyer who is admitted to practice in another jurisdiction and who is practicing in this jurisdiction is subject to the disciplinary authority of this jurisdiction."
Therefore, where the case is to be tried in Michigan the lawyer may not be part of an agreement where the fee in the matter, including both the Michigan lawyer and the out-of-state lawyer, exceeds one-third of the recovery. The client's consent to a larger percentage does not affect the impropriety of a larger fee. The lawyer may not take over the case for the out-of-state lawyer for the 40% contingency fee. Nor may the lawyer cure the problem by personally accepting only half of the fee charged, since MCR 8.121 limits the recovery allowed on the case. Finally, the lawyer may not assist the out-of-state lawyer in circumventing the Michigan rules by taking the allowable one-third fee, knowing the out-of-state lawyer intends to retain the excess. If the lawyer knows the out-of-state lawyer will retain the portion of the fee not allowed under Michigan law, the lawyer should report the matter to disciplinary authorities. MRPC 8.3(a), 8.4(a).